Structured Products Solution

Structured products encompass a wide range of investment vehicles, although all of them have typically been designed to offer investors a customised risk-reward profile. How they achieve that can vary significantly depending on their target market.

Many retail structured products offer exposure to specific markets while limiting investors’ downside by offering some form of capital guarantee (using a combination of securities and derivatives). Different regions tend to display different levels of appetite for these products. In Germany and Switzerland, for example, there is sufficient investor appetite to merit a dedicated structured products exchange. Elsewhere products are typically traded OTC.

Products targeted at institutional or professional investors include fairly straightforward structures such as basket options (an option based on a customised basket of securities) and quantos (where the option and its underlying are priced and settled in different currencies) through to more complex ones such as CLOs and CDOs (as well as CDO² and CDO³).

Although exchange traded funds are not typically included in the category of structured products, there are many funds (particularly those that offer leverage, inverse returns or achieve bespoke risk/reward profiles through the use of derivatives) that would fit the mould of a structured product.

Xenomorph is able to handle a full range of retail and institutional structured products – ranging from capital protected notes, basket options and quantos, through to CLOs and CDOs. The platform enables easy development of pricing and risk management capabilities, including instrument mastering, pricing validation processes, as well as calculation of relevant pricing and risk analytics. The platform also provides ready integration with third-party products such as Numerix, FINCAD, R, Python and Quantlib, allowing all data (reference, market and model-derived) to be centrally controlled through continuous validation checks.

The Xenomorph platform was originally developed to store and manage all aspects of structured products, including:

• Terms and Conditions
• Prospectus documents
• Theoretical Models
• Theoretical Prices and Risk Measures

It can provide complete lifetime storage and management of products and their associated objects such as counterparties, underlying instruments, curves, etc.

Storing the package and its components inside Xenomorph enables the easy development of pricing and risk management capabilities to manage the instruments. This includes the creation of the financial instruments, pricing validation processes, monitoring of market risk with metrics on shortfall, and real-time/end-of-day monitoring of all Greeks.

We provide an interactive environment for the development of financial modelling and analysis. Market data can be combined with derived data generated using the extensive built-in analytics provided by the system or by integrating with third-party products such as Numerix, FINCAD, R, Python and Quantlib. This enables enrichment of the market data sets in a controlled and centralised way.

The tools are all designed for use by business users who can then build everything they need without having to involve database specialists and IT teams. This means that the implementation and total cost of ownership of the system is very low as it can be maintained by BAs and business users with minimal IT support.

For more information, read our Structured Products Technology white paper or get in touch to discuss your structured products management requirements.